Euro Zone Business Activity Growth Stalls

LONDON (Reuters) – Growth in euro zone business activity stalled last month, with a slowdown in the dominant services industry and a deeper downturn in manufacturing. A survey reported on Monday.

The HCOB’s composite Purchasing Managers’ Index (PMI) for the euro zone, compiled by S&P Global and regarded as a solid indicator of overall economic health, fell to 50.2 in July from 50.9 in June.

This barely exceeds the 50 mark that separates growth from contraction, although it is slightly above a preliminary estimate of 50.1, marking five consecutive months of positive readings.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated, “The euro zone’s economy is growing at a snail’s pace in July. Services are not accelerating as earlier this year, while the industrial slump persists.”

A final PMI for the services sector declined to 51.9 last month from 52.8, matching the preliminary estimate. The manufacturing PMI indicated that factory activity remains in contraction, with output declining at its fastest rate this year.

Suggesting no immediate turnaround, demand across the region fell for a second straight month, and at a sharper pace than in June. The composite new business index decreased to 49.0 from 49.4.

This decline occurred even as companies elevated prices at a slower rate in July compared to June. Services inflation, closely monitored by the European Central Bank (ECB), moderated, with the output prices index falling to 52.9 from 53.5—the lowest level since May 2021, which may provide the ECB with room for further policy easing.

After a widely anticipated rate cut in June, the ECB maintained its deposit rate at 3.75% last month but is expected to implement two more cuts this year, possibly as soon as September, according to a Reuters poll.